Fraud comes in many different forms but one of the most egregious and relatively common forms it takes is investment fraud, also known as broker or stockbroker fraud. This type of fraud occurs when a stockbroker or other kind of investment advisor provides biased, inaccurate, or incomplete information about a particular investment in a way that is intended to benefit that broker and/or his brokerage firm instead of the actual investor. It is the legal obligation of every investment professional, including brokers, to deal with and serve their investor clients with care, integrity, and honesty. Brokers are held to certain regulatory standards implemented by both the New York Stock Exchange (NYSE) as well as the National Association of Securities Dealers (NASD) and are also subject to securities laws on the state and federal levels.
Investors who have been the victim of fraud perpetrated by their broker have a legal right to make a claim against that broker as well as against the brokerage firm that he represents. In these types of cases the victims would be suing for stock fraud and professional negligence. But what exactly constitutes stock or investment fraud? Some examples include:
Churning – selling stocks with small gains in order to show a profit, usually involving large numbers of transaction to such an effect.
Unsuitability – pressuring an investor to purchase undesirable stocks that end up in significant losses for the client.
Omission or Misrepresentation – failure by the broker to fully disclose the risk factors associated with a specific stock or investment.
Fraud perpetrated by a broker can also involve failure to place an order, high pressure sales, or unauthorized trades. Investors who believe they have been the victim of broker fraud should contact an experienced attorney immediately.
